Research suggests that women are less likely than men to take out income protection. This trend could mean women are more vulnerable to financial shocks and is a useful reminder to check how you’d cope if the unexpected happened.
According to a report from Royal London, while women are more likely to manage everyday spending for a household, it’s typically men who will make decisions relating to long-term finances, including financial protection.
There are several reasons why women often don’t take a leading role in long-term finances, including a lack of confidence. The study found 21% of women said they weren’t confident in their ability to choose an option that was right for them compared to 12% of men.
In addition, women are more likely to take time away from work or work part-time to look after young children. After having children, 62% of women said they’d considered leaving the workforce or working part-time due to childcare responsibilities. 42% of men said the same.
These factors, among others, mean there’s often a gender gap in finances. Women, for example, usually have far less saved for their retirement when compared to their male counterparts. However, one area you may have overlooked is the effect it can have on financial protection.
Just 16% of women homeowners have income protection in place
The Royal London report found a lack of financial protection that could leave both men and women in a difficult position if they faced a financial shock.
Financial protection is an umbrella term used to describe several types of insurance that would pay out when certain conditions are met. For example, life insurance would pay a lump sum to your loved ones if you passed away during the term. As a result, financial protection may act as a safety net when you or your family need it most.
Income protection would pay out a regular income if you’re unable to work due to an accident or illness. It will usually pay a portion of your regular salary until you can return to work, retire, or the term ends. So, if your income unexpectedly stops because you can’t work, it could help you meet essential financial commitments.
Becoming a homeowner is often a trigger for considering income protection as you might think about how you’d meet your mortgage repayments if something happened.
While almost a quarter (24%) of male homeowners have income protection in place, the figure falls to 16% for women.
Worryingly, this is despite data suggesting women are more likely to need to take time off work. Between the ages of 30 and 65, men have a 26% chance of needing to take two months or more off work, this rises to 37% for women.
Assessing how you’d cope if your income halted unexpectedly could help you see if you’d benefit from income protection and how much cover you might need.
If you take out financial protection, you’ll need to pay regular premiums to maintain the cover. The cost of the cover will depend on a range of factors, including the potential payout and your health, and may vary between providers.
3 useful questions to help you understand your financial resilience
Understanding your financial resilience might help you assess your ability to overcome a financial shock. These three questions could be a useful place to start.
1. What are your essential outgoings?
Getting to grips with your budget could help you assess the challenges you might face if your income stops. Writing down your essential outgoings, from your mortgage to grocery shopping, is a simple way to calculate the income you need each month to keep up with financial commitments.
You might also want to consider costs that aren’t essential but are important to you or your family. For example, you may want to include private school or club membership fees. This could help you understand the cost of maintaining your lifestyle.
2. Does your employer offer sick pay?
In 2024/25, Statutory Sick Pay is just £116.74 a week and is paid for up to 28 weeks. As a result, it’s often not enough to cover essential expenses alone.
However, many workplaces offer a sick pay policy that would continue to pay you an income if you’re unable to work. Checking your contract, reading your employee handbook, or speaking to HR might be useful when you’re reviewing your financial resilience.
There are two key things to check if your employer offers sick pay. First, would you receive your usual salary or a portion of it? Second, how long would they pay an income for if you’re unable to work?
3. What financial safety net do you already have in place?
You may already have taken steps to create a financial safety net. Perhaps you have an emergency fund in a savings account you could dip into if your income stopped, or have other assets you could use.
Taking some time to work out how long your safety net would last could be a useful exercise. If you have enough in your emergency fund to cover three months of essential expenses, you might decide that income protection that pays out after this period would offer you peace of mind.
It may also be important to note how using other assets could affect your long-term plans. For instance, if you intended to use your savings to fund a home improvement project or allow you to travel when you retire, falling ill could risk these goals.
Calculating your income gap
With the information from the above three questions, you can start to calculate the income gap you might face if your income unexpectedly stopped. It may put you in a position where you can start to take steps to reduce the risk of falling short, whether that’s building up your savings or taking out appropriate financial protection.
Contact us to talk about your financial plan and protection
The Royal London research found that women are less likely to seek professional financial advice too. Just 16% of women have spoken to a financial adviser, compared to 23% of men.
As financial planners, we could help you manage your finances in a way that aligns with your goals, including taking out financial protection if appropriate. A financial plan may help you feel more in control of your finances and boost your confidence. Please contact us to arrange a meeting.
Please note:
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
Note that financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.
Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.